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No, Setting Stretch Goals is Not Always a Good Idea

January 27, 2017

About five years ago I weighed 220 pounds, or a good 45 pounds overweight for my frame. Eager to do something about it I made extreme goals – run a marathon, lift weights five days a week, etc.

None of it worked as I’d inevitably fail after a few days and go back to the sweet comfort of buffalo wings. One day, out of ideas, I asked myself – can't I just commit to walking 30 minutes a day?

I did, and I’ve been walking and then running regularly ever since. Now, I’m right around my ideal weight at 178 pounds, and it all started with a small win, not a big goal.

Okay, so what does this have to do with business? New research shared in an article in the Harvard Business Review shows too many people and organizations make the same mistake I did. Things are going poorly and they set unrealistic “stretch” goals they ultimately don’t achieve, which causes them to lose confidence and ultimately fall behind further.

The reason they do this is because companies like Google famously tout the importance and effectiveness of stretch goals. But the reality is most companies aren’t Google, just like at a chubby 220 pounds I wasn’t Dwayne “The Rock” Johnson.

Instead, the research found that for stable companies with discretionary funds, stretch goals are awesome. But, for unstable companies or companies going through hard times, going after smaller wins first is a far superior strategy.

When stretch goals are dangerous

In the HBR article, business school professors Sam Sitkin, C. Chet Miller and Kelly See found that a big problem with stretch goals is that desperate companies often make them. Eager to turn things around, they aspire to change their fortunes overnight.

The problem? They rarely accomplish those goals, which destroys morale and further plunges the organization into despair.

“When confronting an extremely challenging task, the employees of recent winners are more likely to see an opportunity, systematically search for and process information, exhibit optimism and demonstrate strategic flexibility,” the professors wrote in the article. “Companies experiencing weak results, however, are not well positioned. Their employees are more likely to see a stretch goal as a threat, grasp for externally sourced quick fixes, exhibit fear or defensiveness and launch new initiatives in a chaotic and ultimately self-defeating fashion.”

In other words, down-on-their-luck companies trying to accomplish out-of-reach goals only makes things worse, instead of better. Additionally, the researchers found companies that lack extra resources to accomplish these stretch goals are forced to take resources away from business-critical projects, which cuts into the company’s core operations.

So what should you do if you are looking to turn around the fortunes of an organization, or an organization that doesn’t have extra resources to take on stretch goals?

The professors suggested employing these three strategies:

Pursue small wins: Rather than trying to change everything overnight, focus on small wins to start. For example, rather than demanding sales double within a year, focus on ensuring 99 percent of orders are accurate. These small wins build your team’s confidence over time and allow you to make progressively bigger and bigger goals.

Start budgeting for slack resources: If you only have enough resources – i.e. money and people – to do business-critical tasks, it’s difficult to accomplish stretch goals. That's because achieving a stretch goal requires resources, and if you are at capacity, that means resources going away from those business-critical tasks. Hence, it's smart to start finding ways to free up resources, which can be used to pursue bigger goals that can transform your organization.

Pursue small losses: If you start accumulating some small wins and extra resources, don’t risk that goodwill on one big bet. Instead, take smaller risks to start. These smaller risks have shorter run times, so learnings can be garnered quicker. More importantly, they’ll prepare your people for taking risks, which will make them more qualified to take bigger ones down the road.

So who should pursue stretch goals?

Google and Apple are famous for having their employees set stretch goals. They also are two perfect examples of companies that should set stretch goals.

Why?

Because they’ve been successful, so their people have high confidence, and they have extra resources, so it won’t destroy the company if their risks fail. At this point, their chief threat is stagnation, and therefore stretch goals are essential for keeping them motivated.

Many companies aren’t Google and Apple though (no shame in that), and therefore stretch goals might not be a great idea. Another way to put it, a stretch goal for your company might be to get into a position to start making stretch goals.

What this means for you

You need to be realistic when setting your goals, both from a company-wide perspective and an employee perspective. If you are setting goals your company can’t reach – or, on a micro level, your managers are setting goals employees won’t reach – you will merely destroy confidence.

Instead, know both where your organization is and where each of your people are and set goals accordingly. If the person or organization doesn’t have the resources or the confidence to take on big goals, there’s no shame in setting smaller ones.

The professors in their report made it clear they weren’t suggesting companies should be overly conservative and avoid all risk. They simply argued that sometimes you need to start walking, before you can start running marathons.